Finance Committee on March 21st, 2023

[Robert Youngman]

I'm afraid I have to go back. I'm not aware of that detail. I'm sorry.

[Jean-Denis Garon, Bloc, Mirabel, QC]

All right. I can confirm that there is no new pipeline. There is no new project to extract one billion barrels of oil. That kind of project is not in there. In the middle of the pandemic, the European Union was able to move forward. What is interesting about this type of initiative is that government initiative allows for investment in the transition of member states that are lagging or need to do more work. In Canada, that would apply to western Canada and oil.

The Bloc Québécois suggested the idea of green equalization. Do you think that financing structural projects, like those under Europe's green deal, represents the type of effort the government should engage in to support the transition?

[Robert Youngman]

I think countries will be looking to address just transition considerations at the regional level. It makes sense politically to address which regions will have economic losses and to try to provide a buffer to make the transition easier. I think these mechanisms are relevant, certainly, to Canada and other countries.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Garon.

Now we go to MP Blaikie and the NDP for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I want to circle back to the comments by Mr. Lawrence and Mr. Morantz. Listening to them, it seems like it's a pretty simple picture. On the one hand, if other big international players aren't making good on their own climate commitments, there's no point in Canada doing it. In the meantime, if you listen to them, it sounds like we're going to shut off all sorts of past investments that have already been made and where work has already been done.

Of course, that's not what most people are talking about. What most people are talking about is future investments and the future of the Canadian economy. There are two conversations happening at the same time that are obviously related.

We see this already in the insurance world, where they are realizing the very real financial and economic impacts of climate change on their business, and they want to mitigate those. They're not doing that out of altruism. They're doing it out of self-interest—fair enough—but they want to do that. They're looking for investments, and other financial actors are beginning to look for investments that are going to help mitigate the financial and economic consequences of climate change.

What that means is that what we're talking about is creating the conditions for Canada to compete for international investment on the kinds of investments that those big market players are looking to make. In fact, this is a way of diversifying Canada's foreign direct investment and going where the puck is headed.

Do you think that is also a credible story, about the economic moment that we're in, versus the story that says, “This is about destroying the Canadian economy for no good reason, because we're never going to meet our goals anyway?” Which do you think is the more credible economic story?

[Robert Youngman]

I'll leave some time for Mr. Usher if he wishes.

If you look at the number of financial institutions that have taken on net-zero targets, you know that they are very focused on what they are expecting has to be the case, which is that you need to take into account future physical climate risks. This is because we see the impacts today of climate change—this is not off in the future—but also that economies are going to be transitioning, so there is regulatory transition risk and they need to address that.

They will be changing their finance and investments moving forward. They will be looking for the companies that are serious about transitioning and meeting their targets. There's a tremendous opportunity, as well, for technologies that are going to be needed to meet these global emissions reduction objectives. There's enormous economic opportunity there.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Mr. Usher, if you want to weigh in, you have about 15 seconds or so.

[Eric Usher]

Very briefly, yes, I believe what you described is a good pathway forward.

As a comment on the banking sector, all major Canadian banks have set net-zero targets and have issued 2030 interim targets across key sectors. They are stepping up. However, they cannot do it on their own, so they are looking for policy frameworks. They are looking to work together with industry, with government and with other parts of society.

It's an “all hands on deck” type of challenge, but properly mapped out, it is a route to prosperity.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Blaikie.

Now we go to the Conservatives and MP Lawrence for five minutes, please.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

Getting back to the economics of the transition or the goals to get to net zero, at the end of one of my rounds, I asked what the productivity per worker in the green sector was. I understand, of course, that's probably a pretty finite question and why you may not know the answer.

Would you be willing to provide me with either a study or, perhaps, a direct response to the committee on that?

[Robert Youngman]

I'll be happy to look for studies. You're asking for productivity per worker in the green sector versus....

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

It's just that. It's the number. It's how we normally measure productivity. They said the average in Canada is around $55 per hour. In the energy sector in Canada, it's in excess of $500 or $600.

I would be enlightened if you could provide us with that information. It would be great.

[Robert Youngman]

I'd be happy to do so.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

Just building on the questions by my colleague Mr. Morantz, I'm a little bit surprised that you don't have at least some rules or guidance you could give us on the economic impact of transition. Do you see the transition being painful for Canadians or not?

[Robert Youngman]

Going back to the previous question, I actually did say that the OECD has done economic modelling on the overall transition that will occur, and may well have it at a country level. I would be happy to share that study.

I'm sure it's not expected to be easy. It's important to also note at the same time that not addressing climate has enormous costs as well, of course.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes, 100%. I totally agree, as I think everyone here does, that climate change is a pressing challenge. I want to make that clear. It's just how we address this challenge that I think is at discussion here.

Getting back to some of the economics of the transition and some of the specifics, you mentioned earlier that we had no option but to try. I agree with you, but you seemed a little pessimistic there, Mr. Youngman, if I may, with respect to our chances of getting to net zero in 2050. Can you comment specifically on Canada's ability to get there, given the fact that we have not achieved, in the last eight years, one single environmental climate change target?

[Robert Youngman]

That's a very interesting question.

I was referring to a Financial Times article raising the question of whether 1.5° is still within range. The reason is that when you look at global emissions, we have to peak by 2025 in order to get on that target, that path. That said, every 0.1° after 1.5° has significant impacts. We can see in IPCC reports that the difference between 2° and 1.5° is enormous in terms of physical impacts around the world, with the loss of coral reefs and so forth.

I wouldn't say I'm pessimistic on getting to net zero, but I would say there's a broadly recognized need for urgency and for engagement at a national level to think about how it can be done, knowing that it will be challenging, and not to sugar-coat it.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

My apologies if I mischaracterized any of your remarks. It wasn't on purpose.

Do you think Canada will achieve its Paris targets?

[Robert Youngman]

There is always a question about what will be done in the future and what current policies are. To the extent that there's a gap, political will can change that calculus. It's easy to point south of your border, to the U.S., where it was thought that policies were not ambitious enough. Then, lo and behold, with the passage of the Inflation Reduction Act, suddenly there was significant hope about the U.S. being able to achieve its target. So it's a matter of—

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Sorry. I'll just—

[The Chair, Liberal, Peter Fonseca]

That's time. Thank you, MP Lawrence.

Now we're moving to MP Chatel for five minutes, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Chair.

I would like to reassure our witnesses. There is no way Canada will withdraw from the Paris Agreement, as the Conservatives would obviously like us to do.

Canada will not isolate itself from the countries which have signed on to the agreement. We will continue to develop good policies to reach our objectives and sustain a world we can all live in.

I simply want to reassure everyone that this, of course, remains one of the objectives of Canadians.

I would like to hear Mr. Usher and Mr. Youngman speak to the importance of putting a price on pollution as an economic mechanism to achieve the fair green transition.

[Eric Usher]

I absolutely agree pricing externalities is going to be one of the most efficient ways to deal with them, whether it's.... In how you apply a price on carbon, obviously the devil is in the details, and we realize there's important progress that Canada has made, and I'm sure there are more areas for improvement. If we go through a price on carbon, and taxation and fiscal stimulus, there are many ways to do it, but one way or another, pricing the externality is going to drive economic growth. So, yes, I would agree.

[Robert Youngman]

Briefly adding to that, there is a range of policies that countries adapt and there are political economy challenges sometimes with carbon pricing policies in some jurisdictions, despite the fact that, overall, it's economically a very efficient way to reach targets. For example, you can see in the Inflation Reduction Act that the use of tax credits is by far the predominant approach. That's only one approach. Other countries will take other approaches.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

Someone mentioned the Financial Times and I have the article in question in front of me. Canada's carbon emissions have decreased by 6.4% since 2019. We are working hard to reach our goals.

Since I believe I am the last one who has the floor, I would like to give you the final word. Please speak to Canadians to tell them know just how important this issue is to you. Let them know how your efforts and work will support Canadians in making investment choices which align with their values.